Consumption of packaged consumer goods is set to double in India with the bottom-of-pyramid segment shrinking, younger people coming into the workforce, the divide between rural and urban consumers diminishing and a meteoric rise of the digital workforce, Nestle India chairman Suresh Narayanan said on Friday.
Narayanan, who leads India’s largest packaged foods company, said 140 million households are expected to be added to the aspiring and affluent set of consumers by 2030, which is “clear indication” of the growth potential of packaged consumer-facing brands.
He said growth in rural and semi-urban India continues to outpace that of urban markets, and the resilience is likely to sustain. Urban markets faced the brunt of the pandemic, severely impacted with widespread disruption of supply chains, curtailed manufacturing and reverse migration of the labour force. “We are starting to see signs of improvement in urban India which was severely impacted because of lockdowns and the migration. We expect urban growth to return over the next one-two quarters with the reopening of out-of-home channels, provided nothing goes wrong on the pandemic situation,” Narayanan said.
Rural markets contribute 25% to Nestle’s sales, and the maker of Maggi noodles and Nescafe coffee is targeting increasing its distribution reach to 120,000 villages with population of over 5,000 in the next two-three years, up from 90,000 in 2019-end. “We are unlocking new avenues of growth, higher investments in manufacturing, and renovation and innovation continues to be the core of Nestle,” he said.
For the quarter ended December 2020, Nestle India reported 9% increase in revenues to Rs 3,432.6 crore on the back of volume-led domestic growth and improved out-of-home consumption, with two-thirds of its core brands including Maggi, KitKat and Nescafe reporting double-digit growth for the full year. Sales through e-commerce channels now contribute 3.7% to its total domestic sales. Narayanan said through 2020, three of four quarters recorded double digit growth, with only the second quarter being the exception.
Pure play packaged foods companies have seen sales normalising to pre-Covid levels, down from the surge they witnessed last year, with the gradual reopening of malls, restaurants and travel. Narayanan said while pantry stocking has normalised, quality of consumption has evolved to trusted brands.
On the ongoing farmers issue, Narayanan said: “We work closely with thousands of farmers for our dairy and coffee businesses; the farmers are more than just suppliers for us and I hope as a country we can address all the issues that are being talked about.”